Smacked by the invisible hand: the wrong debate …dlaitsch/publications/aam.pdfSmacked by the invisible hand: the wrong debate at the ... and distortions associated with government

Neoliberal Theory in Education System Reform

Smacked by the invisible hand: the wrong

debate at the wrong time with the wrong people1

Dan Laitsch

Associate Professor

Faculty of Education, Simon Fraser University

Bio: Dan Laitsch in an Associate Professor in the Faculty of Education at Simon Fraser

University, 250-13450 102 AvenueSurrey, BC V3T 0A3, Canada. E-mail [email protected]. His

research interests include research utilization, market based reform, and public accountability.

Abstract: Over the past 3 decades, educators have faced an increasing variety of reform

proposals that can best be contextualized as efforts to commodify and privatize public education.

While supporters of market based reforms attempt to place these proposals within education

theory, they are in reality firmly entrenched in Neoliberal economic theory. This paper traces the

evolution of Neoliberal economic thought from its birth in the 1940s to its rise to prevalence in

the 1970s. It looks at the continuing impact of Neoliberal theory on public and political thought,

as well as education reform proposals. If supporters of public education are to respond

adequately to these reform proposals, they will need to reframe their approach on economic,

rather than educational, grounds. KW: Neoliberalism; Education reform; Privatization

1 This is an Author's Accepted Manuscript of an article published in the Journal of Curriculum Studies 45(1) [2013, Feb. 15] [copyright Taylor & Francis], available online at: http://www.tandfonline.com/ [10.1080/00220272.2012.754948].

Laitsch, D.

Smacked by the invisible hand: the wrong debate at the wrong

time with the wrong people

Introduction

Daniel Tanner’s op-ed, used to contextualize this issue of the Journal of Curriculum Studies,

reviews current school and curriculum policies and rightly identifies many areas for concern. As

Tanner notes, we are in an era dominated by testing and assessment; curriculum narrowing;

teaching to the test; top down educational policies tying such tests to individual and institutional

evaluations; and promotion of privatization of educational services through vouchers and charter

schools.

In response, Tanner highlights the comprehensive schools as bastions of the community and the

support of local schools by parents and community members as factors likely to mitigate these

challenges, suggesting that Americans ultimately believe in public schools and see the value in

the access to economic and communal benefits that they provide as worth protecting.

On these accounts, Tanner’s analysis is insightful, yet ultimately limited if we are to reverse the

trend toward commodification and privatization of public education. These changes are

symptoms of a deeper underlying problem in education, and just as treating symptoms in

medicine does nothing to address the underlying health issue, responding to these recent changes

individually will leave the problem untreated. Many of the challenges schools face today are a

reflection of the economic system of the country, and many of proposed reforms stem from a

neoliberal economic theory that is only indirectly related to educational theory. As a result,


educators have frequently engaged in debate without fully realizing the context of the

conversation in which they are engaged. By addressing the reform proposals individually, and

within the education context, we are ultimately talking about the wrong things with the wrong

people.

Public Education and Neoliberalism

In a recently published book I co-edited with colleagues in the United States, we noted that

current conversations about education are largely focused on how to improve schools, with little

discussion regarding what it is we want schools to actually improve. Without a clear vision of

what schools should be doing, we ask, does it make sense to really debate how they can best do

it? As a result of this question, we embarked on an effort to find out what people think schools

should be about in the 21st Century (View, Laitsch, and Earley, 2012). While we heard a

diversity of view points, we didn’t hear that schools should be about testing, narrowing of the

curriculum, teaching to the test, or promoting the private good. These goals, and the reforms that

support them, are instead part of a much different conversation going on well outside of

Education circles.

Since the mid 1970s, the United States has been engaged in implementing clearly articulated

economic ideals that can be traced back to a meeting of what came to be known as the Mont

Pelerin Society, convened by economist Friedrich von Hayek in 1947. Members of the Society

were concerned that ‘the values of Western civilization were imperiled’ and in response they

sought to strengthen ‘the principles and practice of a free society and to study the workings,

virtues, and defects of market-oriented economic systems’ (Mont Pelerin Society, n.d.). Since

Laitsch, D.

1947 the Mont Pelerin Society has met annually or semi-annually to continue their work which

served as the foundation of a new liberalism in economic theory--what we now think of as

Neoliberalism.

Defining Neoliberalism

Adam Smith’s Wealth of Nations has been called the defining document of modern economics

(Friedman, 1986) and serves as the economic foundation for Neoliberal thought. Its fundamental

tenants include: private ownership of property, production of goods and services for profit,

creation of competitive markets, and the division of labor. In particular, Neoliberal theory

‘emphasizes the efficiency of market competition, the role of individuals in determining

economic outcomes, and distortions associated with government intervention and regulation of

markets’ (Palley, 2004). From a political perspective, Neoliberals believe that ‘the only

legitimate purpose of the state is to safeguard individual liberty, understood as a sort of

mercantile liberty for individuals and corporations. This conviction usually issues, in turn, in a

belief that the state ought to be minimal or at least drastically reduced in strength and size, and

that any transgression by the state beyond its sole legitimate raison d'etre is unacceptable’

(Thorsen, 2010). In a Neoliberal economy, government may support the military and police

functions that protect private property rights, facilitate new markets and expand existing markets

(Harvey, 2007) and layout and enforce the ground rules for market competition. In the Neoliberal

view, regulations from government that impede free trade, taxation that reduces profit, and

public (i.e. government) ownership of industry, all are to be avoided. From a Neoliberal

perspective, the smaller the government, the better (Harvey, 2007; Klees, 2008; Lobao & Hooks,

2003; Thorsen, 2010).


Based on these general principles, we can define Neoliberalism as a school of economic and

political thought as follows:

Neoliberalism emphasizes individual commercial liberty and private ownership of

property, and the production of goods and services for profit, as well as the

efficiency of market competition and the role of individual choice in determining

economic outcomes. Neoliberals believe that the state should be reduced in

strength and size and focused on protecting and creating competitive markets.

Through the division of labor, economic efficiency is increased, resulting in

greater productivity and profit.

This is the general definition of Neoliberal economic and political thought that will serve as the

foundation for this paper.

Prior to the 1970s the primary economic theory driving political thought was Keynesianism

(Palley, 2004), a theory that more willingly embraced government involvement in the economy

and served in part as the economic foundation for the policies of the Great Society. The

Neoliberal concept of how the economy functions and how economic productivity can be

maximized didn’t rise to prominence until the 1970s, in part as a response to the failure of

Keynesianism to explain the inflation and stagnation that was occurring. It is that economic

crisis, and the past 60 years of strategic advocacy, that have resulted in the basic tenants of

Neoliberal economic policy dominating political and public discourse regarding the economy,

government, and government services (Palley, 2004); forming the theoretical basis for many of

the reforms (and problems) facing educators today.

Laitsch, D.

The Hegemony of Neoliberalism

The broad reach of Neoliberal thought in the U.S. is the result of many decades of work by

Neoliberal advocates, scholars, and philanthropist investors. As far back as the 1970s, using the

Neoliberal framework described earlier in this paper, conservative foundations began creating a

system of think tanks and centers of scholarship committed to advancing Neoliberal economic

ideals, in particular those around ‘individual liberty,’ ‘limited government,’ and ‘free markets’

(Covington, 1997). The scholarship produced by these think tanks consistently emphasizes free

market solutions to policy problems and is broadly and freely disseminated, maximized through

aggressive promotion and the reach of the internet (Thunert, 2003). Over the course of the

1990’s, the National Center for Responsive Philanthropy estimates that the top 20 Neoliberal

think tanks spent more than $1 billion dollars advancing economic thought and policies

(Callahan, 1999) and building a Neoliberal policy infrastructure. As Callahan notes in his

introduction to the report,

...ideas matter...They can and do serve as flagships of ideological and intellectual

movements. They can help create new social understandings of old issues. They

can weaken existing political coalitions or pave the way for the formation of new

ones. And they can provide lawmakers and others with the architectural

frameworks within which to build policy agendas and justify governing decisions

(1999, p. 3).

A follow up study covering the years 1999-2001 found that Conservative Neoliberal grant

making tended to support general operating funds and policy work, as opposed to the program-

oriented support found in traditional grant making. Such strategic support then offers


substantially more flexibility for grantees as they can solidify their operating structures and

systems, build dissemination networks, and implement other capacity building strategies focused

on institutional longevity. Across the three years of the study, $26,283,850 went to organizations

active in education and education policy, and 60% of all grants allocated for operating support

went to build capacity in the education sector. In particular grants were targeted for work in

academic change and school choice policy. Another $10.5 million went to support and expand

the broader Neoliberal infrastructure provided by groups such as the State Policy Network and

Philanthropy Roundtable, as well as general policy work of groups like the American Legislative

Exchange Council (Krehely, House, & Kernan, 2004). The substantial and strategic funding

helped build and strengthen Neoliberal capacity to disseminate economic ideas across industries

and throughout public, political, and academic circles. The result has been a substantial shift in

thought across ideological economic lines, with Conservative Neoliberal values winning the

public war of ideas (Krehely et. al, 2004).

This advocacy of economic thought is not limited to North America. Similar organizational

structures exists in countries around the world and Neoliberal policies are promoted globally by a

network of Nongovernmental Organizations (NGOs) and Intergovernmental Organization

(IGOs). The groups include the World Bank, European Commission, and the International

Development Association, as well as the Bilderberg group, Trilateral Commission, World

Economic Forum, and World Business Council for Sustainable Development (Bhanji, 2008;

Carroll & Carson, 2003).

Laitsch, D.

Application in Education Reform

The broad reach of Neoliberalism has had a substantial impact on education reform proposals in

the United States and other countries as market-oriented economic ideas have permeated the

education policy realm. Using the definition of Neoliberalism highlighted earlier, a nubmer of

themes can be traced from economic priorities to education change (see Table 1). These include

the state as reduced in size and strength through privatization of public services; the efficiency

of market competition as driven by individual choice; the production of goods and services for

profit; and the division of labor to increase productivity (Hursh, 2005, 2007). While each of these

areas contextualizes different (and sometimes overlapping) reform efforts, I’ll explore two here:

privatization as a mechanism to reduce government size; and the division of labor to increase

efficiency.

[INSERT TABLE 1 HERE]

Privatization of public services

The drive for a smaller government means that state run institutions are constantly under

pressure to reduce spending (e.g. reduce the need for taxation) and privatize services. This is

particularly true for education, one of the largest government expenditures. In the United States

and Canada, for example, government spending on public education accounts for approximately

13.1% and 12.3% respectively, of all government expenditures (World Bank, 2012). In the

2008–09 school year, that amounted to some $610 billion for K-12 education in the U.S.--money

that could be made available to private industry if the system were privatized.

This potential market has not gone unnoticed by the business and venture capital markets

(Simon, 2012), with venture capital transactions in the U.S. K-12 markets reaching $389 million


in 2011. Attending a meeting of private equity firms interested in investing in for-profit

education opportunities in August 2012, Simon noted that speakers identified several areas for

privatization, including assessment and learning resources for the new national standards;

software (such as Schoology and DreamBox Learning) that can increase economic efficiency by

replacing the work of teachers; and the provision special education services, particularly for

Autistic students (identified as a growth market). Simon also noted that private management

companies (Education Management Organizations, or EMOs) currently run some 5500 charter

schools across the country.

Researchers with the National Education Policy Center have been tracking these EMOs for 13

years. They note that in 2010-11, almost 100 for-profit EMOs were operating in 33 states, and

that 35% of charter schools (enrolling 42% of all charter school students) were run by these for

profit EMOs. While they note that for-profit EMO growth is moderating (and may be shifting to

provision of supplemental services), growth in the nonprofit EMO sector remains steady (Miron

et. al, 2012).

In addition to EMO’s and Charter School, public resources are also reallocated to private schools

through the use of tuition tax credits and vouchers. Tax credits allow individuals and corporation

to reduce their taxes through deductions/credits for education expenses or contributions to

private organizations that then award tuition vouchers to qualifying applicants. These programs

exist in some form in nine states (Laitsch, 2011). Government provided vouchers, which are

tuition credits awarded by the state to students for use at any school of their choice (public or

private, secular or religious), are currently in place in nine states and the District of Columbia.

Laitsch, D.

Taken together, these programs transfer approximately $1 billion from the public to the private

school sector each year (Laitsch, 2011).2

Division of labor and commodification of curriculum

The concept of division of labor within economic theory refers to the increased productivity

brought about by greater specialization of the workforce--that as workers become more skilled at

a narrower range of activities, efficiency is increased and productivity rises as complex tasks are

broken into smaller pieces. As complexity increases, this means that workers with scarce

specializations can command higher remuneration for their skills (Clark, 2005). In other words,

the concept of specialization of labor creates a perceived benefit for advanced specialization

which in many cases can be provided through education.

This is part of the foundation of human capital theory, which posits that increasing human capital

through education has a strong link to increased economic productivity. In the later half of the

20th Century, Human Capital Theory evolved to help explain economic growth in the United

States--growth that could not be explained using the traditional indicators of physical capital,

labor, land and management (Nafukho, Hairston, & Brooks, 2004). This link between increased

education and economic productivity is advanced by many in education as a justification for

increased public investment (Hungerford & Wassmer, 2004; Sims, 2004); however, this

argument contributes to the way we view schools and the curriculum, commodifying the work of

educators and opening that work to greater commercialization. While it may seem like a good

argument to increase (or at least maintain) public investment in education, it is a double edged 2 Some states limit vouchers and tax credits to specific groups of students, such as special education students, or specific geographical locations. Programs in Maine and Vermont do not allow vouchers to be used at religious schools.


sword that also opens the door for the argument that any weakening of the economy is the result

of failures in education. The result of this edge of the sword can be seen in many recent

education reform proposals including A Nation at Risk, Goals 2000, and the No Child Left

Behind Act (Scott, 2011).

The perspective that obtaining better, and more specialized education could expand economic

opportunity has also been embraced by educators and activists interested in overcoming social

inequality. By increasing educational outcomes, and concomitantly individual economic

outcomes, inequity across ethnic background and class could be reduced. In making this

argument, however, advocates for social justice commodify both social inequality and the

purposes of education (Labaree, 2011). This is not to say that these links don’t exist, or that such

changes will not realize some degree of realignment; however, commodifying the conversation

does not address social indicators of inequality or the economic causes of such inequity.

At least in part the move towards standardized curricula and assessment can also be linked to the

concept of dividing labor (and the commodification of education). By better defining what the

specializations underlying the division of labor are, economic efficiency can be improved as

students are better prepared for entry into the labor market. At the school level, better defining

what it is students should learn increases the efficiency of the school system. From a Neoliberal

perspective, as teachers evolve into technicist deliverers of the curriculum, cost savings can be

accrued through deprofessionalizing teaching (by reducing salaries and direct and indirect

training costs) and as identified earlier, technology (by replacing labor with learning software

and online learning opportunities).

Laitsch, D.

Such commodification also puts tremendous pressure on the education system to provide greater

opportunities for specialization and the concomitant economic advantage that comes with such

specialization, potentially resulting in degree inflation and credentialism (Davis, 1981; Labaree,

2012). At the same time, it puts downward pressure on the curriculum, as each level of education

is redefined as preparation for the next level of education. Delineation of the curriculum is not

developmentally aligned, rather it is aligned to maximize achievement and access to the next

stage in education, pushing advanced curricular goals to earlier educational stages (Watts &

Walsh, 1997).

Outcomes of Neoliberal Economic Policy on the Context of Education

Economic Stratification

A significant outcome of the application of Neoliberal economic policy over the past three

decades has been a substantial economic stratification (Lavine, 2012; Harvey, 2007; Palley

2004). Since the turn toward Neoliberalism in the early 1980‘s, the amount of net-worth (assets

minus liabilities) held by top earners has increased substantially, despite being unequal to begin

with. In 1989, the top 1% of wealth owners held 30.1% of the net-wealth, rising to 34.5% by

2010 despite the recession. In 1989, the top ten percent of wealth owners held 67.2% of the

wealth in the United States--by 2010 that number had risen to 74.5%. As of 2010, 98.9% of

wealth in the U.S. was held by the top half of wealth owners (Lavine, 2012).

One of the results of this stratification, of particular concern for schools, is the rate of childhood

poverty. The U.S. Census Bureau has only been keeping statistics on childhood poverty since


2001, but between 2001 and 2010 the childhood poverty rate rose from 16.9% to 21.6%

(Macartney, 2011), making the U.S. second only to Romania in childhood poverty rates for

developed countries (UNICEF, 2012). The negative educational and developmental

consequences of high rates of poverty on children are well documented (Duncan, Magnuson, &

Boyce, 2010; Kishiyama et. al, 2009), and while the effects can be mitigated (National Scientific

Council on the Developing Child, 2005), such support would require substantial public support

to adequately address the symptoms, and substantial changes to our economic system to address

the actual problem.

Implications

One of the important lessons of the shift in economic policy outlined here is that there have been

substantial impacts on education policy and the context in which education occurs, despite

efforts by education stakeholder groups to resist these changes. In large part, this is because

educators have engaged in the debate by highlighting the failure of these reforms to effect

changes in educational outcomes. Studies are published showing that school choice reforms have

mixed or no substantial impact on student achievement (Barrow & Rouse, 2008; Levin, 1998;

Plucker et. al, 2006; Witte, Sterr, and Thorn, 1995; Wolf, et. al, 2009); there are substantial

problems with the theory, accuracy, and implementation of merit pay programs (Levin, 2011;

Liitle, 2009; Perry, Engbers & Jun, 2009; Ramirez, 2010); and high stakes assessment and

accountability programs are shown to have no effect on student achievement (National Research

Council, 2011); and yet the response of educators seems to fall on deaf ears.

This may be because they are targeted at the wrong policy level. As illustrated throughout this

paper, these reforms are rooted not in education theory and theories of learning, pedagogy, or

Laitsch, D.

child development; they are instead located in economic theory. To respond to economic

argument using educational theory misses the point. We should instead be targeting Neoliberal

reforms using economic arguments. As George Lakoff has pointed out, it is important to frame

the debate using the appropriate language and metaphors (Lackoff, 2004)--something that

educators fail to do when they address economically generated education reforms on educational

theory grounds. Even when, as in this paper, we attempt to respond at the appropriate level (e.g.

economics), using the language of the opponent handicaps our responses as we are already

agreeing to debate within the context (language, metaphors, and meanings) set for us (in this case

Neoliberal economic theory). Finally, the powerful outreach and engagement in economic

thought already implemented by Neoliberal activists and think tanks has set the frame in which

much of the public and political conversation occurs, as understanding of market forces, the

“benefits” of competition, the “dysfunction” of government, and the “power” of choice and

personal liberty define the economic and political conversation.

If educators want to regain control of their profession and initiate positive change, as well as

respond to current Neoliberal reform proposals, we will need to engage with economists,

political scientists, and other intellectuals who have alternative frameworks to offer. Unless we

can present the public and our political leaders with an alternative vision to Neoliberalism, we

will continue to cede the context of the debate and fail to change the nature of the conversation.

There is hope, as alternative viewpoints do exist, even if they are not well understood or broadly

presented outside of scholarly circles. Various genres of Keynesianism for example may provide

a renewed framework for discussion of the role of government in the economy. The Obama


administration’s approach to the recent recession is essentially a reapplication of Keynesian

theory--and the success or failure of the economic recovery could have substantial impact on

economic theories of government activity. Despite Neoliberal attacks on government and

government services, there are also times when the public is reminded of the importance of

government. Hurricane Sandy, and the resources leveraged by government to support citizens

effected by the storm has also reminded us of that value (Bennett, & Dworkin, 2012).

Ultimately, a new consensus on a different economic approach to government is needed if we are

to turn back Neoliberal efforts to change government, and concomitantly education. As Palley

points out:

At the most fundamental level there is a divide between those who see the

neoliberal economic paradigm as sound (e.g., neoliberals and Third Way social

democrats) and those who see it as intrinsically flawed (labor social democrats).

The political problem is that these opposing views split social democrats, making

it harder to dislodge the paradigm. ...Neoliberals continue to promote the

paradigm, and their response to the crisis has been to try and shift blame onto

government, arguing that the crisis is another example of government failure (pg..

17). ...The only satisfactory solution is the creation of a new, progressive

Keynesian consensus that places economics front and center on the political stage

(2009, pg. 18).

Laitsch, D.

Even so, unless we are able to reach out to the general public and the broader body of politicians

and redefine the economic frame, including helping people understand the language and

metaphors of the new frame, we are unlikely to shift the dialogue away from Neoliberalism,

competition, choice, and personal liberty, the frames already set for us. As long as we respond in

isolation as educators, rather than in partnership with like-minded economic and political bodies,

we will be unlikely to change the conversation.

As Lackoff points out, Neoliberals have a long-term view on change and been working for 40

years on their frame, funneling billions of dollars into its development and dissemination:

...they started back in the '50s, and after the '64 election they really got started.

For the last 30 to 40 years, they have pumped $2 billion into supporting all of

their think tanks and media apparatus. They have built this series of think tanks

that started out after the Goldwater debacle, when ‘conservative’ was a dirty

word, when the idea of tax relief could not be introduced in two words. The

phrase would have been meaningless. And what they did was to develop these

ideas with very great patience and fortitude, in campaign after campaign, year

after year, and invent the right words as the ideas came into popular view. Their

success didn't happen overnight. They took a long-term view. (Lackoff, 2004)

Change will not come quickly or easily, but alternative voices in education, economics, and

political science need to start working together to advocate for that change and build the

infrastructure to support it.


Table 1: From economic theory to education change

Economic theory Policy Priority Education change

Privatize services Private ownership Reduce the public sector

Privatize providers

Commodify curriculum National Standards Textbooks and resources

Privatize services and providers Goods and services for profit Increase profit Lower costs (e.g. salary and

personnel; increase class sizes; online education; etc.)

Public school choice

Private school choice

Charter schools Market competition Increase providers and markets

Small schools (e.g. Gates; Charter schools)

Prepare workforce Standardize assessment

Division of labor Commodify curriculum

National Standards Textbooks and resources Merit Pay

Information for choice Assessment and accountability Merit pay

Individual choice

Increase mobility School choice

Deregulation Reform teacher certification De-unionize

Lower costs (see above) Reduce public funding

Privatize services and providers

School and district consolidation

Small government

Reduce Bureaucracy Reduce state education department staff and services

Laitsch, D.

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